Dear Momentum Options Subscriber,
The back-and-forth action and nearly-three-month-long trading range has been frustrating for Wall Street. The ones that don’t do homework are on pins and needles waiting for next major pullback so they can star nibbling on oversold stocks. They believe stocks are overvalued at current levels and have said that quarterly earnings would be lousy.
While some companies will struggle to meet the suit-and-ties’ earnings expectations, one company that won’t is Sony (SNE).
I have been mentioning that there is little to no analyst coverage of the stock because the company is based in Japan and reports their numbers in yen. Shares trade here in the U.S. on the New York Stock Exchange as an ADR (American Depositary Receipt).
With earnings due out next week, Sony raised its earnings estimates for the second time in three months this morning. The company expects to earn 68 billion yen, or $569 million, on better-than-expected sales of digital cameras and video games. This was more than three times greater than the previously projected profit of 20 billion yen for the quarter.
The news has lifted shares 4%, and we locked in a sweet 180% return on one third of our position in the call options. I have updated the parameters of the trade below to ensure that we hold on to a triple-digit gain.
As far as the market, the Dow is up 74 points to 18,024, while the S&P 500 is higher by 10 points to 2,107. The Nasdaq is advancing 15 points to 5,029, and the Russell 2000 is up a point to 1,265.
I have been busy this week loading up the Watch List with possible New Trades. While I don’t have one ready as I go to press, I’m trying my best to have it ready within the next hour or so. If not, we can try again tomorrow. For now, let’s go check on our juicy profits.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 40-11-1 (77%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.
Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
All prices given in this update are current as of 2:05 p.m. EST.
Every new Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the Open Trades and Closed Trades.
PowerShares QQQ Trust (QQQ, $108.51, up $0.45)
QQQ May 110 calls (QQQ150515C00110000, $0.70, up $0.10)
Entry Price: $0.60 (4/10/2015)
Exit Target: $1.20
Return: 17%
Stop Target: $0.50 (Stop Limit)
Action: Take profits and sell to close the first half the QQQ May 110 calls at current levels. Also, set a Stop Limit at $0.50 on the second half of the position.
After being down over 50% coming into the week, I want to use today’s strength to lock in partial profits.
The QQQs have reached a peak of $108.54 today. Resistance is at $108.50, and a close above this level would be bullish. Support is at $107-$106.
Dot Hill Systems (HILL, $6.43, up $0.02)
HILL September 7.50 calls (HILL150918C00007500, $0.55, flat)
Entry Price: $0.45 (4/20/2015)
Exit Target: $1.35-$1.80
Return: 22%
Stop Target: None
Action: Support is at $6-$5.80 on dips below $6.25. Resistance is at $6.50-$6.75.
You can read my earnings outlook and review the stock’s chart in yesterday’s Pre-Market Update.
Sony (SNE, $32.22, up $1.34)
SNE May 32 calls (SNE150515C00032000, $1.30, up $0.60)
Entry Price: $0.50 (4/20/2015)
Exit Target: $1.00, raise to $1.50-$2.00 (closed 1/3 at $1.40 on 4/22/15)
Return: 167%
Stop Target: $0.90 (Stop Limit)
Action: Raise the Exit Target from $1.00 to $1.50-$2.00. Also, set a Stop Limit at $0.90 on the remaining two thirds of the position.
Shares have reached a 52-week high of $32.60 today. I would like to see $32 hold into the close.
Earnings are due out on April 30. You can read my outlook on what to expect in the April 7 Mid-Market Update.
Rambus (RMBS, $14.49, up $0.31)
RMBS August 14 calls (RMBS150821C00014000, $1.30, up $0.10)
Entry Price: $0.65 (4/20/2015)
Exit Target: $1.70 (closed first half at $1.30 on 4/21/15)
Return: 100%
Stop Target: $0.90 (Stop Limit)
Action: Resistance is at $14.50. Support is at $14-$13.75.
Jabil Circuit (JBL, $23.68, up $0.21)
JBL May 24 calls (JBL150515C00024000, $0.40, up $0.10)
Entry Price: $0.60 (4/10/2015)
Exit Target: $1.20
Return: -33%
Stop Target: None
Action: Resistance is at $23.50-$24. Support is at $23.
Rigel Pharmaceuticals (RIGL, $4.23, up $0.06)
RIGL June 5 calls (RIGL150619C00005000, $0.40, flat)
Entry Price: $0.25 (3/31/2015)
Exit Target: $0.75-$1.00
Return: 60%
Stop Target: None
Action: Resistance is at $4.20-$4.25. Continued closes above these levels would be bullish for a possible run to $4.50-$5. Support is at $3.80-$3.60 on a close below $4.
Trades on Hold — other 2015 Portfolio Open positions (3): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire. Click on the Open Trades and Closed Trades pages to see all open and closed positions.
Marvell Technology (MRVL) May 18 calls (from February 2015) — The sector could see heated M&A activity in the coming months, and MRVL tends to move on takeover chatter — Continue to hold.
BlackBerry (BBRY) June 13 calls (from March 2015) — This is a speculation trade from early March on BBRY receiving a takeover offer of $14 or better by mid-June — Continue to hold.
Cypress Semiconductor (CY) June 16 calls (from March 2015) — Earnings are due out next Thursday, April 30 — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options